Crude oil prices fall about 2% as rally on Middle East war risk takes a pause

Crude oil futures fell about 2% on Tuesday, as the rally on geopolitical risk took a pause while the market waits for Israel to strike back against Iran.

“Oil can keep ascending only for so long purely based on perceptions and not actual supply disruption,” Tamas Varga, an analyst at oil broker PVM, said in a Tuesday note.

Oil prices have surged about 13% through Monday’s close since Iran fired around 180 ballistic missiles at Israel last week, raising fears that Israel might retaliate by hitting Iran’s crude industry.

Here are Tuesday’s energy prices at around 7:39 a.m. ET:

• West Texas Intermediate November contract: $75.52 per barrel, down $1.62, or 2.1%. Year to date, U.S. crude has gained about 5%.
• Brent December contract: $79.31 per barrel, down $1.62, or 2%. Year to date, the global bench mark has risen more than 2%.
• RBOB Gasoline November contract: $2.1149 per gallon, down 1.81%. Year to date, gasoline has advanced more than 2%.
• Natural Gas November contract: $2.772 per thousand cubic feet, up 0.95%. Year to date, gas is ahead about 9%.

The market was also disappointed that Chinese officials did not announce any new stimulus plans at a press briefing Tuesday.

Prior to the recent escalation in the Middle East, the market was swept by bearish sentiment on soft demand in China, the world’s largest crude importer, and worries that oil supplies will exceed demand in 2025. In early September, oil prices hit their lowest level since December 2021.

“After yesterday’s surge, oil prices are pulling back a bit, partially due to the fact that the Chinese government did not add any new stimulus to the system,” Phil Flynn, senior analyst at the Price Futures Group, said in a Tuesday note.